Trivariate Research has indicated that the valuations of artificial intelligence-related stocks might be on a downward trend, primarily due to rising interest rates and potential regulatory pressures.
Adam Parker, the firm's founder, noted that the recent increase in the Federal Reserve's overnight interbank borrowing rate to a range of 3.75% to 4% could negatively impact heavily indebted AI companies, as they will face higher borrowing costs.
Additionally, political opposition to data center construction and anticipated job losses due to AI advancements could lead to further regulations, affecting stock performance.
Despite these challenges, Trivariate remains optimistic about certain AI stocks, highlighting companies like Iren, Nebius, CoreWeave, AMD, Marvell Technology, and Oracle, which are expected to see revenue growth that could offset declining valuations. For instance, CoreWeave's stock rose over 6% recently, although it has seen a decline of more than 26% over the past three months.
Oracle's shares have also dropped over 19% in the same period, but it trades at a lower forward price-to-earnings ratio compared to the S&P 500. Meanwhile, Marvell has experienced a significant increase of about 200% year to date. Parker expressed a cautiously optimistic outlook, emphasizing that the narrative of upward earnings revisions remains strong